Underwriter Law and Legal Definition

Insurance companies protect individuals and organizations from financial loss by assuming billions of dollars in risks each year. Underwriters serve to identify and calculate the risk of loss from policyholders, establish appropriate premium rates, and write policies that cover these risks. An insurance company may lose business to competitors if the underwriter appraises risks too conservatively, or it may have to pay excessive claims if the underwriting actions are too liberal.

Underwriters analyze information in insurance applications to determine if a risk is acceptable and will not result in a loss. Applications are often supplemented with reports from loss-control consultants, medical reports, data vendors, and actuarial studies. Underwriters then must decide whether to issue the policy and the appropriate premium to charge. In making this determination, underwriters serve as the main link between the insurance carrier and the insurance agent. On occasion, they accompany sales agents to make presentations to prospective clients.

The following is an example of a Federal Statute defining the term underwriter:

According to 15 USCS § 77ccc [Title 15. Commerce and Trade; Chapter 2a. Securities and Trust Indentures; Trust Indentures] the term underwriter means “any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission.”